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RNS Number : 2215S
National Grid PLC
14 May 2009
14 May 2009
National Grid plc
Results for the year ended 31 March 2009
HIGHLIGHTS
* Strong performance
*
* Earnings per share up 14% (on a pro forma basis) 1
* 8% increase recommended in full year dividend
* Clear strategy delivering results
*
* Good progress with US gas rate case filings
* Strong capital investment of GBP3.2bn; in line with plans
* Successful funding programme - GBP1.9bn funding issued or agreed for 2009/10
* Outlook for 2009/10 is positive with current trading in line with our
expectations.
FINANCIAL RESULTS FOR CONTINUING OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| (GBPm, at actual exchange rate) | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Business performance2 | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 2,915 | 2,595 | 12 |
+------------------------------------------------------+-----------+-----------+-----------+
| Pre-tax profit | 1,770 | 1,829 | (3) |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings | 1,250 | 1,247 | - |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings per share | 50.9p | 47.8p | 6 |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings per share (pro forma basis)1 | 50.9p | 44.5p | 14 |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Statutory results | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 2,623 | 2,964 | (12) |
+------------------------------------------------------+-----------+-----------+-----------+
| Pre-tax profit | 1,394 | 2,182 | (36) |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings | 919 | 1,572 | (42) |
+------------------------------------------------------+-----------+-----------+-----------+
| Earnings per share | 37.4p | 60.3p | (38) |
+------------------------------------------------------+-----------+-----------+-----------+
| | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Dividend per share | 35.64p | 33.0p | 8 |
+------------------------------------------------------+-----------+-----------+-----------+
Steve Holliday, Chief Executive, said:
"We have delivered over the year a strong financial and operational performance.
Operating profit increased by 12%, pro forma earnings per share increased by 14%
and we are recommending an 8% increase in our dividend per share. Operationally
we remain focused on our investment plans and driving further efficiency. I am
delighted that we exceeded the $100m targeted run rate of synergies from
KeySpan.
These results are excellent and show that, even in these difficult economic
times, National Grid's low-risk business model is robust. We have had a good
start to 2009/10 and are confident that it will be another strong year for us".
CHIEF EXECUTIVE'S REVIEW
Last year I stated that our priorities for 2008/09 focused on execution and
operational delivery, in particular on investment, and the regulatory agenda,
together with making real progress on the longer term issues of climate change
and security of supply.
Future policy and regulatory framework
We continue to make good regulatory progress in the US, filing gas rate cases
for Rhode Island, New Hampshire and New York in 2008/09. On 24 November 2008 the
Rhode Island Public Utilities Commission agreed the Narragansett Gas
Distribution rate case. This provided for a 10.9% increase in revenues and an
allowed return on equity of 10.5%. The new rates came into effect in Rhode
Island on 1 December 2008.In New Hampshire, we filed a settlement with the New
Hampshire Public Utilities Commission on 23 January 2009. All issues were
addressed in the settlement except the allowed return on equity. A temporary
rate increase of 3.75% has been in effect since 23 August 2008. A final decision
from the New Hampshire Public Utilities Commission is pending. In the Niagara
Mohawk gas rate case, which we filed in May 2008, we have reached an agreement
with the New York Public Services Commission (NYPSC) Staff and we expect a
decision from the NYPSC on the filing imminently.
These rate cases were nearing the end of their assumed terms and were no longer
appropriate for the current economic and investment climate. We expect these
filings to result in an improvement in achieved returns during 2009/10. They
include increased operating and capital expenditure allowances and the
recognition of historic capital expenditure in the rate base. Other mechanisms
in these rate cases, such as the inclusion of bad debt allowances and a true up
on additional operational and capital expenditure, will further mitigate risk to
the businesses.
On 16 July 2008 the NYPSC agreed that the 2008 tranche of the Niagara Mohawk
$1.47bn five year electricity capital investment plan qualified for recovery
through our deferral account.We will make further filings for recovery of
investment in each year, recovering the balance as part of our next rate plan.
This year we will make electric rate case filings for Massachusetts Electric
Company and Narragansett.New electricity rates are expected to come into effect
in January 2010. In addition, in August 2008, we filed with the Massachusetts
Department of Public Utilities a 'notice of intent' setting out our plans to
file a new consolidated gas distribution rate case during spring 2010 - in this
rate case we intend to make a consolidated filing, combining our Boston,
Colonial and Essex gas businesses into a single rate plan, greatly simplifying
and improving the transparency of our Massachusetts gas regulatory arrangements.
In March 2008, Ofgem announced a review of the regulatory approach for energy
networks in the UK, the 'RPI-X @ 20' project. This review will influence UK
Transmission and UK Distribution price controls which will run from April 2012
and April 2013 respectively. We believe that this review affords an opportunity
to make necessary changes to deliver a stable and reliable regulatory framework
that meets the challenges of climate change and security of supply, and
encourages the necessary investment. I have been appointed as a member of
Ofgem's 'RPI-X @ 20' Advisory Panel.
Disciplined investment programme
In 2008/09, we delivered on target our planned GBP3.2bn investment programme.
This has increased our UK and US asset bases by 3% and 4% respectively. In
2009/10 we plan to invest around GBP3.4bn, supported by our current rate plans
and long term contracts. Going forward we plan a similar level of investment
each year until 2012.
We finance our capital investment programme through a combination of internal
cash flows and borrowings. In 2008/09 we raised GBP4.9bn of long term debt to
cover both the refinancing of existing debt and to fund our capital investment
programme. Our funding requirements for 2008/09 were completed in December 2008
and we are making significant progress in meeting our expected GBP2.5bn funding
requirement for 2009/10, having issued or agreed c.GBP1.9bn of long term debt
since 1 January 2009. We are confident that we can continue to access the debt
markets to fund investment.
Our effective group interest rate for 2008/09 was 5.7%, a reduction of 60 basis
points compared to 2007/08.For 2009/10 we expect our effective interest rate to
continue to reduce, as a result of our variable rate debt benefiting from low
interest rates and our index-linked debt benefiting from lower levels of
inflation.
We are committed to financing our business in a manner consistent with
maintaining an efficient balance sheet and optimising our cost of
capital.We confirm our aim to manage the long-term trend for interest
cover within a range of around 3.0 - 3.5 times, which we believe is consistent
with single A range ratings for our main UK operating companies.Our interest
cover for 2008/09 was 3.1 times and we expect all credit rating metrics to
improve in 2009/10, as interest rates fall.
Driving efficiency via the global operating model
Our global operating model continues to be embedded into the business. We are
standardising processes across the business in order to improve efficiency and
productivity.
We have made solid progress against our targets in 2008/09. As stated in our
interim management statement in February the integration of KeySpan is
progressing ahead of plan and we achieved the $100m synergy savings run rate
ahead of the original 31 March 2009 target. At 31 March 2009, the run rate was
$129m.
Our investment programme in 2008/09 has seen our regulatory asset base grow by
around 3%. Despite this growth in our asset base our real regulated controllable
cost base, excluding bad debts, has remained broadly flat at GBP2.2bn.We have a
clear strategy to mitigate the impact of bad debts in our US distribution
businesses, where bad debt write-offs for the year amounted to 1.51% of billed
revenues ($212m), only a 7 basis points increase over last year. In addition,
we have increased our US bad debt provision by $73m. Regulated controllable
costs (excluding bad debts) as a proportion of our asset base were 8.1%3 in
2008/09.
In October 2008 we announced our cumulative global procurement operating and
capital expenditure savings target of between GBP170m - GBP350m over a three
year period. We expect to be at the upper end of this range. We are driving
procurement costs down through a combination of leveraging National Grid's
scale, unit price reductions and a decrease in the number of our suppliers.
Collectively, contracts have already been negotiated that will deliver a savings
run rate exceeding GBP100m a year.
Climate change and security of supply
We remain focused on playing a leading role in addressing the longer term issues
of climate change and security of supply facing the energy industry. We continue
to work closely with regulators and policy makers to deliver energy networks of
the future.
In the US we have submitted energy efficiency programmes in New York,
Massachusetts and Rhode Island. In September 2008, the NYPSC agreed a three year
electric and gas energy efficiency programme in upstate New York. Cost recovery
began in October 2008, with achieved savings forecast to be around $19m over the
three year period. National Grid is currently working with Federal and State
regulators in developing the best approach to access stimulus funding to benefit
both shareholders and customers. In response to an NYPSC request National Grid
has filed for two smart grid demonstration projects in the Syracuse and Capital
district areas covering 80,000 customers. In addition National Grid has also
filed a proposal with the Massachusetts Department of Public Utilities for a
similar trial smart grid programme in Massachusetts.
In the UK we are working closely with Ofgem to develop frameworks to facilitate
earlier renewable generation connections and following successful discussions
with Ofgem, GBP10m has been provided to National Grid for preliminary works to
be carried out as part of the strategic investment that we proposed through the
Electricity Network Strategy Group. In our Gas Distribution business we are at
the early stages of renewable gas demonstration projects to inject biogas into
our distribution networks.
DIVIDEND AND SHARE REPURCHASE
Our dividend policy targets an 8% increase annually through to March 2012. In
line with this policy, the Board has recommended a final dividend of 23p per
ordinary share ($1.7437 per American Depository share (ADS)), bringing the
full-year dividend to 35.64p per ordinary share ($2.6913 per ADS). The final
dividend is to be paid on 19 August 2009 to shareholders on the register as at 5
June 2009.Subject to shareholder approval at the 2009 Annual General Meeting we
also propose to replace the existing dividend re-investment plan with an
optional scrip dividend scheme, to commence with the 2008/09 final dividend.
Under our US rate plans, cash flows from stranded assets in our Electricity
Distribution business are scheduled to end in 2011 and do not form part of our
core on-going business. We have to date returned these cashflows to shareholders
via an on-market share repurchase programme. In May 2007, we extended this share
repurchase programme to return GBP1.8bn of proceeds from the sale of our
Wireless businesses.
Since 1 April 2008 we have repurchased 85.5m shares at a value of GBP594m. This
completes the return of the US stranded asset post-tax cash flows for 2008/09
and the return following the sale of our Wireless businesses. However, in the
current financial environment we believe that it is now sensible to suspend our
share repurchase programme.
OUTLOOK
We expect another good year in 2009/10 across all our businesses. In particular
we expect a strong performance from our Transmission and Electricity
Distribution and Generation businesses. In Electricity Distribution and
Generation we incurred a number of one-off costs in 2008/09, including a severe
ice storm across our New York and New England service territories.Our UK
regulated revenues are subject to an RPI + X indexation at the start of each
financial year. For the purpose of setting revenue for 2009/10 the average RPI +
X element of the rate increases was 5.2%4.
Significant progress has already been made in meeting our funding requirements
for 2009/10. To date we have issued or agreed GBP1.9bn of long term debt and
need to raise only a further GBP600m5 to complete our funding requirements for
2009/10. This is covered more than 3 times by our committed bank lines. We
actively manage our interest rate risk with over 50% of our debt exposed to
floating or index-linked rates in the longer term. We expect our financing
costs in 2009/10 to benefit from lower interest rates, some of which have
already been locked in, and inflation. In 2009/10 we plan to invest around
GBP3.4 bn, supported by our current rate plans and long term contracts.
Overall we are well positioned to deliver a year of strong performance,
supporting our progressive dividend policy.
BASIS OF PRESENTATION
Unless otherwise stated, all financial commentaries are given on a business
performance basis, at actual exchange rates. Business performance represents the
results for continuing operations before exceptional items, mark-to-market
remeasurements of commodity contracts and financial instruments that are held
for economic hedging purposes but did not achieve hedge accounting, and US
stranded cost recoveries. Commentary provided in respect of results after
exceptional items, mark-to-market remeasurements and US stranded cost recoveries
is described as 'statutory'.
REVIEW OF RESULTS AND FINANCIAL POSITION
Operating profit was GBP2,915m, up 12% on the prior year (up 2% on a constant
currency basis6). This was primarily driven by strong results in our
Transmission and Gas Distribution businesses and the strengthening of the US
dollar.
Net finance costs were GBP1,150m, GBP380m higher than the prior year, mainly as
a result of an increase in average net debt due to the inclusion of a full year
of KeySpan related debt and further issuance to fund our capital expenditure
programme. Profit before tax was down 3% to GBP1,770m. The tax charge on profit
was GBP517m, GBP62m lower than the prior year, resulting in an effective tax
rate for the year of 29.2% (down from 31.7% in 2007/08).
Earnings were flat on the prior year at GBP1,250m. Earnings per share increased
6% from 47.8p last year to 50.9p.
Exceptional items and remeasurements for continuing operations decreased
earnings by GBP587m after tax. These mainly relate to restructuring costs and
commodity contract remeasurements. A detailed breakdown of exceptional items
and remeasurements can be found on page 24.
Operating cash flows from continuing operations, before exceptional items,
remeasurements, stranded cost recoveries and taxation, were GBP217m higher than
the prior year at GBP3,336m.
Organic investment in our continuing businesses increased by 6% to GBP3.2bn,
largely reflecting increased capital expenditure in Gas Distribution as a result
of the acquisition of KeySpan.
Our net debt rose to GBP22.7bn at 31 March 2009 compared with GBP17.6bn at 31
March 2008. This mainly reflects the strong appreciation of the US dollar in
the period since April 2008, together with our investment programme for
2008/09. The appreciation of the dollar has increased the sterling value of our
US net assets (excluding net debt) by around GBP4.5bn and dollar denominated net
debt by around GBP4bn compared with the position reported at 31 March 2008.
Our average return on equity7 was 10.8% over the three year period ending 31
March 2009, compared with 11.8% over the three year period ending 31 March 2008.
In 2008/09 the annual return was 6.6%, down on the prior year, largely
reflecting lower RPI inflation. Interest cover7 at 31 March 2009 was 3.1x,
down from 3.2x at 31 March 2008, mainly reflecting the inclusion of a full year
of KeySpan related debt.
REVIEW OF TRANSMISSION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 3,937 | 3,255 | 21 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (2,227) | (1,694) | (31) |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (409) | (412) | (1) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 1,301 | 1,149 | 13 |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 1,301 | 1,188 | 10 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by geographical segment | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 1,126 | 1,021 | 10 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 175 | 167 | 5 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 1,301 | 1,188 | 10 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 1,259 | 1,600 | (21) |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 182 | 111 | 64 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 1,441 | 1,711 | (16) |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Rate base* | | |
+------------------------------------------------------+-----------------------+-----------+
| | 2008/09 | 2007/08 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK regulatory asset value (GBPm) | 11,001 | 10,559 | 4 |
+------------------------------------------------------+-----------+-----------+-----------+
| US rate base ($m) | 1,032 | 1,007 | 2 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Returns | | |
+------------------------------------------------------+-----------------------+-----------+
| | 2008/09 | 2007/08 | |
+------------------------------------------------------+-----------+-----------+-----------+
| UK operational return (real) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Electricity transmission | 4.7% | 5.2% | |
+------------------------------------------------------+-----------+-----------+-----------+
| Gas transmission | 6.9% | 6.9% | |
+------------------------------------------------------+-----------+-----------+-----------+
| US regulatory return on equity** | | | |
| (nominal) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| New England *** | 11.8% | 11.9% | |
+------------------------------------------------------+-----------+-----------+-----------+
* Details of returns and rate base for all rate plans can be found at
www.nationalgrid.com.
** Weighted average return on equity based on regulatory asset value.
*** In New York, our electricity, transmission and distribution activities
(including our stranded cost recoveries) make a combined regulatory filing each
calendar year. The combined New York rate base and returns are reported in our
Electricity Distribution and Generation business line.
Transmission delivered a very strong performance during the year. Operating
profit increased to GBP1,301m, up 13%. This was primarily driven by allowed
increases in regulated income of GBP140m. UK regulated income increased by
GBP111m, largely as a result of above-inflation revenue increases under the
price control allowance. An under-recovery of income of GBP42m will be carried
forward to 2009/10. US regulated income increased by GBP29m.Other items led to
a net reduction of GBP27m.Movement in exchange rates had a GBP39m year-on-year
positive impact on operating profit.
Capital investment in Transmission was GBP1,441m.This mainly related to UK
electricity transmission investment and the major projects included Thames
Estuary reinforcement, our London cable tunnels project and underground cabling
work associated with the Olympic site preparation. The balance of the UK
investment was principally driven by new load-related infrastructure on our gas
transmission systems. In the US we are investing in regional reliability
programmes; the largest project in the year related to the ongoing upgrade of
the electricity transmission system in the north-east Massachusetts area. These
investments resulted in increases in our Transmission UK regulatory asset value
and US rate base by 4%, and 2% respectively, as compared to the prior year.
In UK Transmission we outperformed against our network reliability scheme in
2008/09, earning GBP9m. Incentivised losses of supply totalled 51.5MWh.
We measure the financial performance of our UK regulated business using an
operational return metric. In our Electricity Transmission business we achieved
a 4.7% operational return, in line with regulatory assumptions for the year. In
our gas transmission business we achieved a 6.9% operational return,
significantly outperforming regulatory assumptions, largely as a result of
strong incentive scheme performance.
In the US we measure our financial performance against the allowed regulatory
return on equity, the basis used by our regulators in the US for setting rates.
In New England we achieved a weighted average 11.8% return on equity, broadly in
line with the prior year. Our New York electricity transmission and distribution
businesses currently operate under a single rate plan; this rate base and return
are reported in our Electricity Distribution and Generation line of business.
In July, the NYPSC agreed that the 2008 portion of our $1.47bn five year
investment plans qualified for partial recovery under our deferral account. We
expect to make further filings for partial recovery of investment in each of the
next three years, recovering the balance as part of our next rate plan. Around
one third of this investment is in transmission assets. In November, the
Federal Energy Regulatory Commission (FERC) approved a package of incentives in
relation to the New England East-West Solution (NEEWS) project. We expect that
our investment in the NEEWS project will total around $650m over the medium
term, and will earn an enhanced FERC return on equity of 12.89%.
REVIEW OF GAS DISTRIBUTION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 6,254 | 4,236 | 48 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (4,621) | (2,977) | (55) |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (349) | (272) | (28) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 1,284 | 987 | 30 |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 1,284 | 1,107 | 16 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by geographical segment | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK | 672 | 595 | 13 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 612 | 512 | 20 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 1,284 | 1,107 | 16 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK capex | 173 | 161 | 7 |
+------------------------------------------------------+-----------+-----------+-----------+
| UK repex | 425 | 353 | 20 |
+------------------------------------------------------+-----------+-----------+-----------+
| US | 421 | 188 | 124 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 1,019 | 702 | 45 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Rate base* | | |
+------------------------------------------------------+-----------------------+-----------+
| | 2008/09 | 2007/08 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| UK regulatory asset value (GBPm) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Gas Distribution | 6,550 | 6,498 | 1 |
+------------------------------------------------------+-----------+-----------+-----------+
| US rate base ($m) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| New York | 5,156 | 5,038 | 2 |
+------------------------------------------------------+-----------+-----------+-----------+
| New England | 2,953 | 2,651 | 11 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Returns | | |
+------------------------------------------------------+-----------------------+-----------+
| | 2008/09 | 2007/08 | |
+------------------------------------------------------+-----------+-----------+-----------+
| UK operational return (real) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Gas distribution | 5.8% | 5.1% | |
+------------------------------------------------------+-----------+-----------+-----------+
| US regulatory return on | | | |
| equity (nominal)** | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| New York | 10.2% | 11.4% | |
+------------------------------------------------------+-----------+-----------+-----------+
| New England | 8.0% | 8.1% | |
+------------------------------------------------------+-----------+-----------+-----------+
* Details of returns and rate base for all rate plans can be found at
www.nationalgrid.com.
** Weighted average return on equity based on regulatory asset value
Gas Distribution has also achieved a very strong performance for the year,
with operating profit of GBP1,284m, up 30%. This was primarily driven by an
increase in US regulated net income. Rate increases in New York and Long Island,
together with colder weather and increased energy efficiency incentives combined
to increase US regulated net income by GBP140m. The beneficial effect of timing
on the recovery of income has resulted in an over-recovery of revenues in
2008/09 of GBP46m. UK regulated net income increased by GBP63m. This was
largely as a result of above-inflation revenue increases under the price control
allowance.The UK regulated business will carry forward an under recovery of
GBP10m of income to 2009/10. Other items reduced operating profit by GBP26m,
largely relating to an increase in bad debt reflecting the downturn in the US
economy. The year-on-year movement in exchange rates increased operating profit
by GBP120m.
During the period, together with our gas distribution alliance partners, we have
replaced over 1,900km of gas mains in the UK, resulting in total replacement
expenditure (repex) of GBP425m.Since the beginning of the programme in 2002, we
have now replaced 24% of our metallic gas mains. In the US, in addition to
investment in replacing ageing network infrastructure, we added around 60,000
new gas customers during 2008/09. Overall, our investment in network
infrastructure projects in the UK and US resulted in total capital expenditure
(including repex) of GBP1,019m.
We measure the financial performance of our UK regulated business using an
operational return metric. We achieved a 5.8% operational return, outperforming
regulatory assumptions.This was mainly as a result of outperformance on
incentives and operating expenditure.
In New York, we achieved a weighted average 10.2% regulatory return on equity,
ahead of our weighted average base regulatory allowance. This is largely as a
result of outperformance of base allowed returns in our 'downstate' New York gas
businesses. Following new rate plan agreements, new gas rates went into effect
for KeySpan Energy Delivery New York (KEDNY) and KeySpan Energy Delivery Long
Island (KEDLI) in January 2008.In New England, we achieved a weighted average
return of 8% - these networks are not currently earning their allowed returns
and we expect the filings we made in 2008/09 in New Hampshire and Rhode Island
to improve returns during 2009/10.
We are at the early stages of a renewable gas demonstration project to inject
biogas into our UK distribution grid. In the US, we are at the early stages of
a similar project at Newton Creek waste water treatment site in New York.
REVIEW OF ELECTRICITY DISTRIBUTION AND GENERATION OPERATIONS
+------------------------------------------------------+-----------+-----------+-----------+
| Summary results | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income* | 4,537 | 3,126 | 45 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (4,049) | (2,650) | (53) |
+------------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortization | (223) | (146) | (49) |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - actual exchange | 265 | 330 | (20) |
| rate | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit - constant currency | 265 | 431 | (39) |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit by principal activities | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at constant currency) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Electricity distribution | 210 | 398 | (47) |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island transmission and | 24 | 12 | 100 |
| distribution services | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island generation | 31 | 21 | 48 |
+------------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 265 | 431 | (39) |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Year ended 31 March | |
+------------------------------------------------------+-----------------------+-----------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| Electricity distribution | 317 | 244 | 30 |
+------------------------------------------------------+-----------+-----------+-----------+
| Long Island generation | 38 | 13 | 192 |
+------------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 355 | 257 | 38 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Rate base** | |
+------------------------------------------------------+-----------------------------------+
| | 2008/09 | 2007/08 | % change |
+------------------------------------------------------+-----------+-----------+-----------+
| US rate base ($m) | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| New York | 4,124 | 4,103 | 1 |
+------------------------------------------------------+-----------+-----------+-----------+
| New England | 2,190 | 2,047 | 7 |
+------------------------------------------------------+-----------+-----------+-----------+
+------------------------------------------------------+-----------+-----------+-----------+
| Returns | |
+------------------------------------------------------+-----------------------------------+
| | 2008/09 | 2007/08 | |
+------------------------------------------------------+-----------+-----------+-----------+
| US regulatory return on | | | |
| equity (nominal)*** | | | |
+------------------------------------------------------+-----------+-----------+-----------+
| New York | 6.7% | 9.1% | |
+------------------------------------------------------+-----------+-----------+-----------+
| New England | 5.9% | 8.8% | |
+------------------------------------------------------+-----------+-----------+-----------+
* Excludes revenue from stranded cost recoveries.
** Details of returns and rate base for all rate plans can be found at
www.nationalgrid.com.
***Weighted average return on equity based on regulatory asset value.
Electricity Distribution and Generation operating profit decreased by 20%
during the year to GBP265m. Higher storm costs reduced operating profit by
GBP74m, mainly relating to a severe ice storm across our service territory in
December 2008. The majority of these costs are recoverable under our New York
deferral account and Massachusetts storm fund. One-off items reduced operating
profit by GBP45m, the largest component of this being a non-cash one-off item
relating to historic transmission charges. Other items, including an increase in
reliability and other service related costs, reduced operating profit by GBP47m.
The strengthening of the dollar had a GBP101m year-on-year positive impact on
operating profit.
National Grid gained national recognition for its response to the ice storms in
December, winning the Edison Electric Institutes emergency recovery award. With
states of emergency declared in Massachusetts, New York and New Hampshire,
National Grid restored power to more than 550,000 customers in eight days. Last
year also saw National Grid deliver its best reliability performance since the
acquisition of KeySpan. We achieved our reliability targets for 99.6% of our
electricity customer base.
Capital expenditure was up 38% on the prior year at GBP355m.This increase mainly
relates to movements in exchange rates. The balance of the investment was
principally driven by higher generation spend, incurred as a result of a full
year of KeySpan related investment. On 16 July 2008 the New York Public Service
Commission agreed that the 2008 tranche of the Niagara Mohawk $1.47bn five year
electricity capital investment plan qualified for recovery through our deferral
account. We will make further filings for recovery of investment in each year,
recovering the balance as part of our next rate plan.
We measure our US financial performance against the allowed regulatory returns
on equity, the basis used by our regulators in the US for setting rates. In New
England we achieved a weighted average 5.9%. In New York we achieved a weighted
average of 6.7%. These networks are not currently earning their allowed returns
and in May and June we plan to make electric rate case filings for Massachusetts
Electric Company and Narragansett respectively. Features of these filings will
include reconciliation of costs ("true up") for pensions and employee benefits,
decoupling of revenue from delivery volumes and full recovery of commodity
related bad debts.New electricity rates under these plans are expected to come
into effect in January 2010. In early 2010 we plan to make a filing for the
Niagara Mohawk electric business to seek new rates from January 2011.
This year we expect a significant improvement in the financial performance of
Electricity Distribution and Generation, largely because of the number of
one-off costs incurred in 2008/09.In addition we expect revenue
increases, reflecting our rate case filings in New England.
REVIEW OF NON-REGULATED AND OTHER ACTIVITIES
+-----------------------------------------------------+-----------+-----------+-----------+
| Summary results | Year ended 31 March | |
+-----------------------------------------------------+-----------------------+-----------+
| (GBPm) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Revenue and other operating income | 750 | 709 | 6 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating costs | (539) | (416) | (30) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Depreciation and amortisation | (146) | (164) | (11) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 65 | 129 | (50) |
+-----------------------------------------------------+-----------+-----------+-----------+
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit by principal activities | Year ended 31 March | |
+-----------------------------------------------------+-----------------------+-----------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Metering | 133 | 104 | 28 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Grain LNG | 21 | 12 | 75 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Property | 1 | 93 | (99) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Sub-total operating profit | 155 | 209 | (26) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Corporate and other activities | (90) | (80) | (13) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Operating profit | 65 | 129 | (50) |
+-----------------------------------------------------+-----------+-----------+-----------+
+-----------------------------------------------------+-----------+-----------+-----------+
| Capital investment | Year ended 31 March | |
+-----------------------------------------------------+-----------------------+-----------+
| (GBPm, at actual exchange rate) | 2009 | 2008 | % change |
+-----------------------------------------------------+-----------+-----------+-----------+
| Metering | 137 | 126 | 9 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Grain LNG | 213 | 221 | (4) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Property | 9 | 19 | (53) |
+-----------------------------------------------------+-----------+-----------+-----------+
| Other | 68 | 17 | 300 |
+-----------------------------------------------------+-----------+-----------+-----------+
| Capital investment | 427 | 383 | 11 |
+-----------------------------------------------------+-----------+-----------+-----------+
Operating profit from our Non-regulated and other activities decreased by 50%
during the year to GBP65m. This mainly reflected a reduction in operating profit
in our Property business, partially offset by planned improvements in our
Metering and Grain LNG businesses. As reported in February, in the current
challenging market conditions, we have taken action to defer property sales in
order to preserve value. This has resulted in operating profit decreasing by
GBP92m. We are continuing to carry out site remediation on our property
portfolio and these assets will be retained until market conditions improve.
Operating profits in our Metering business increased by GBP29m.This was
primarily driven by inflationary price increases and lower controllable costs.In
February 2008, the Gas and Electricity Markets Authority (GEMA) issued a
decision to fine us GBP41.6m for a breach of the UK Competition Act 1998 in
respect of term contracts with gas suppliers entered into by our UK metering
services business in 2004. We subsequently appealed this decision to the
Competition Appeal Tribunal (the Tribunal). On 29 April 2009 the Tribunal
overturned the decision in part and reduced the fine to GBP30m but also upheld
the original decision in part. We continue to review the Tribunal's ruling and
are considering our legal position including potential grounds for appeal.
Our Grain LNG business delivered an operating profit of GBP21m, an increase of
75% on the prior year, as a result of Phase II becoming operational. Capital
expenditure remained broadly flat at GBP213m. Phase III construction commenced
in July and is planned to complete in 2010. This will add a further LNG tank
and a second unloading jetty, increasing the total annual capacity of the
terminal to around 15m tonnes, representing around 20% of total UK gas demand.
These investments are underpinned by long-term, take-or-pay contracts, which
deliver an index-linked revenue stream.
JOINT VENTURES
BritNed, a 50/50 joint venture with TenneT (the Dutch electricity transmission
owner), is on target for completion of the 260 km electricity link between the
UK and the Netherlands by December 2010 and commercial operations in April
2011. Construction of the landing sites at Maasvlakte and the Isle of Grain is
well under way. In addition, the land cable manufacture is now complete and 50%
of the marine cable has now been manufactured and tested.
We have made progress towards generating sustainable power and heat at our
pressure reduction stations via Blue-NG, our joint venture with the renewable
generation company, 2oC. In August 2008, we received consent from Ofgem for
Blue-NG to trial the technology at eight of our sites. The first site, at
Beckton, London, received planning permission for a 20MW plant in January 2008.
Planning permission for the second site, at Southall, was applied for in January
2009. The construction contract for the first two sites should be signed in
mid-2009, with both sites expected to commence operations in late 2011.
The Millennium pipeline went into full service on time in December 2008.
Millennium is the centerpiece of a larger project involving expansion of the
existing Empire Pipeline, Algonquin Pipeline and Iroquois Pipeline that received
FERC approval in December 2006.
PRO FORMA FINANCIAL RESULTS FOR CONTINUING OPERATIONS
On 24 August 2007, we completed the acquisition of KeySpan, significantly
growing our footprint in North America and positioning National Grid as the
second largest energy delivery company in the US (by number of customers).
The timing of the completion of this acquisition benefited our reported results
for 2007/08, and to provide a like for like view of the continued underlying
growth in our business, we have provided comparative results in the table below
that illustrate the impact of the KeySpan acquisition as if it had completed on
1 April 2007.
These adjustments are included for illustrative purposes only. They are prepared
on a business performance basis, representing the results for continuing
operations before exceptional items, remeasurements, and US stranded cost
recoveries.
+-----------------------------+---------+--------+-------------+--------+
| Business | Year ended 31 March |
| performance | |
+-----------------------------+-----------------------------------------+
| (GBPm, | 2009 | 2008 | adjustment* | 2008* |
| at | actual | actual | | pro |
| actual | | | | forma |
| exchange | | | | |
| rate) | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Transmission | 1,301 | 1,149 | - | 1,149 |
+-----------------------------+---------+--------+-------------+--------+
| Gas | 1,284 | 987 | +4 | 991 |
| Distribution | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Electricity | 265 | 330 | +19 | 349 |
| Distribution | | | | |
| & Generation | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Non-regulated | 65 | 129 | +7 | 136 |
| & other | | | | |
| activities | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Operating | 2,915 | 2,595 | +30 | 2,625 |
| profit | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Net | (1,150) | (770) | (160) | (930) |
| finance | | | | |
| costs | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Share | 5 | 4 | +3 | 7 |
| of | | | | |
| post-tax | | | | |
| joint | | | | |
| ventures | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Pre-tax | 1,770 | 1,829 | (127) | 1,702 |
| profit | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Taxation | (517) | (579) | +42 | (537) |
+-----------------------------+---------+--------+-------------+--------+
| Minority | (3) | (3) | - | (3) |
| interests | | | | |
+-----------------------------+---------+--------+-------------+--------+
| Earnings | 1,250 | 1,247 | (85) | 1,162 |
+-----------------------------+---------+--------+-------------+--------+
| Earnings | 50.9p | 47.8p | (3.3)p | 44.5p |
| per | | | | |
| share | | | | |
+-----------------------------+---------+--------+-------------+--------+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation as noted above.
BOARD CHANGES
Robert Catell retired as an Executive Director of the Company on 31 March 2009.
He will continue as a Non-executive Director and Deputy Chairman of National
Grid, as well as Non-executive Chairman of National Grid USA, until the
conclusion of the Company's Annual General Meeting on 27 July 2009.
METRIC DEFINITIONS
The financial metrics we have reported today are designed to give greater
transparency on National Grid's relative performance and our performance against
regulatory contracts.
NATIONAL GRID RETURN ON EQUITY (nominal)
This metric captures the total operational and financial performance of the
company.
Calculation: IFRS adjusted profit after tax divided by the equity base.
* IFRS adjusted operating profit after tax is as reported on a business
performance basis, adjusted for: regulatory depreciation; capitalisation, mainly
relating to gas distribution mains replacement (repex) in the UK; pensions;
indexation of our UK regulatory asset value; and discontinued operations.
* Equity base is equal to the total UK regulatory asset value; plus total capital
invested in our US businesses; plus net assets for our Non-regulated and other
businesses; minus net debt as reported under IFRS.
UK OPERATIONAL RETURN (real)
(Transmission - UK; Gas Distribution - UK)
This metric is comparable to the "vanilla return" used by Ofgem.
Calculation: (IFRS adjusted operating profit minus current tax), divided by
regulatory asset value
* IFRS adjusted operating profit is as reported on a business performance basis,
adjusted for: regulatory depreciation; capitalisation of gas distribution mains
replacement (repex); and pensions.
* Current tax is the tax charge as reported on a regulatory basis.
US REGULATED RETURN ON EQUITY (nominal)
(Transmission - US; Gas Distribution - US; Electricity Distribution &
Generation)
This is a US GAAP metric as calculated annually (financial year to 31 March for
New England Power; calendar year to 31 December in Massachusetts and New York)
and reported to our regulators.
Calculation: Regulated net income divided by equity rate base.
* Regulated net income is adjusted for earned savings in New York.
* Equity rate base is as reported to our regulators. For New England Power the
rate base applied is the common equity excluding goodwill.
INTEREST COVER
This is an IFRS metric and reflects the calculation used by our credit rating
agencies. It is used as an indicator of balance sheet efficiency.
Calculation: Adjusted funds from operations divided by adjusted interest
expense.
EFFICIENCY METRIC
Calculation: Adjusted regulated controllable costs divided by asset base.
* Regulated controllable costs excluding bad debts.
* Asset base is the estimated mid year UK regulatory asset value and US rate base.
Worked examples are available at www.nationalgrid.com.
CONTACTS
National Grid:
Investors
+--------------------------------------+--------------------------------------+--------------------------------------+
| David Rees | +44 (0)20 7004 3170 | +44 (0)7901 511322(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| George Laskaris | +1 718 403 2526 | +1 917 375 0989(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| Richard Smith | +44 (0)20 7004 3172 | +44 (0)7747 006321(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| Victoria Davies | +44 (0)20 7004 3171 | +44 (0)7771 973447(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
Media
+--------------------------------------+--------------------------------------+--------------------------------------+
| Clive Hawkins | +44 (0)20 7004 3147 | +44 (0)7836 357173(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| Chris Mostyn | +1 718 403 2747 | +1 347 702 3740(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| Gemma Stokes | +44 (0)1926 65 3555 | +44 (0)7974 198333(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
| Brunswick: Paul Scott | +44 (0)20 7396 5333 | +44 (0)7974 982333(m) |
+--------------------------------------+--------------------------------------+--------------------------------------+
An analyst presentation will be held at the London Stock Exchange, 10
Paternoster Square, London EC4M 7LS at 9:15am (UK time) today.
Live telephone coverage of the analyst presentation - password National Grid
+-------------------------+------------------------------------+-------------------------+----------------------------+
| UK dial in number | +44 (0) 203 023 4488 | US dial in number | +1 866 966 5335 |
+-------------------------+------------------------------------+-------------------------+----------------------------+
Telephone replay of the analyst presentation (available until 11 June 2009)
+-------------------------+------------------------------------+-------------------------+----------------------------+
| Dial in number | +44 (0) 208196 1998 | Account number | 682162# |
+-------------------------+------------------------------------+-------------------------+----------------------------+
| | | | |
+-------------------------+------------------------------------+-------------------------+----------------------------+
A short video of Steve Holliday talking about these results is available on
www.cantos.com. A live web cast of the presentation will also be available at
www.nationalgrid.com.
Photographs are available on www.newscast.co.uk.
You can view or download copies of our latest Annual Report or the Annual Review
from our website at www.nationalgrid.com/corporate/Investor+Relations/ or
request a free printed copy by contacting investor.relations@ngrid.com.
CAUTIONARY STATEMENT
This announcement contains certain statements that are neither reported
financial results nor other historical information. These statements are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements include information with respect to National Grid's
financial condition, National Grid's results of operations and businesses,
strategy, plans and objectives. Words such as "anticipates", "expects",
"intends", "plans", "believes", "seeks", "estimates", "may", "will", "continue",
"project" and similar expressions, as well as statements in the future tense,
identify forward-looking statements. These forward-looking statements are not
guarantees of National Grid's future performance and are subject to assumptions,
risks and uncertainties that could cause actual future results to differ
materially from those expressed in or implied by such forward-looking
statements. Many of these assumptions, risks and uncertainties relate to factors
that are beyond National Grid's ability to control or estimate precisely, such
as delays in obtaining, or adverse conditions contained in, regulatory approvals
and contractual consents, unseasonable weather affecting the demand for
electricity and gas, competition and industry restructuring, changes in economic
conditions, currency fluctuations, changes in interest and tax rates, changes in
energy market prices, changes in historical weather patterns, changes in laws,
regulations or regulatory policies, developments in legal or public policy
doctrines, the impact of changes to accounting standards, technological
developments and the ability to access capital markets and other sources of
credit in a timely manner on acceptable terms, especially considering the recent
deterioration of market conditions in the global economy and financial markets.
Other factors that could cause actual results to differ materially from those
described in this announcement include the ability to integrate the businesses
relating to announced or recently completed acquisitions with National Grid's
existing business to realise the expected synergies from such integration, the
availability of new acquisition opportunities and the timing and success of
future acquisition opportunities, the timing and success or other impact of the
sales of National Grid's non-core businesses, the failure for any reason to
achieve reductions in costs or to achieve operational efficiencies, the failure
to retain key management, the behaviour of UK electricity market participants on
system balancing, the timing of amendments in prices to shippers in the UK gas
market, the performance of National Grid's pension schemes and the regulatory
treatment of pension costs, and any adverse consequences arising from outages on
or otherwise affecting energy networks, including gas pipelines owned or
operated by National Grid. For a more detailed description of some of these
assumptions, risks and uncertainties, together with any other risk factors,
please see National Grid's filings with and submissions to the US Securities and
Exchange Commission (the "SEC") (and in particular the "Risk Factors" and
"Operating and Financial Review" sections in its most recent Annual Report on
Form 20-F). Except as may be required by law or regulation, National Grid
undertakes no obligation to update any of its forward-looking statements. The
effects of these factors are difficult to predict. New factors emerge from time
to time and National Grid cannot assess the potential impact of any such factor
on its activities or the extent to which any factor, or combination of factors,
may cause results to differ materially from those contained in any
forward-looking statement. The contents of any website referenced herein do not
form part of this document.
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| CONSOLIDATED INCOME STATEMENT | | | | 2009 | | 2008* | |
| for the years ended 31 March | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | |Notes | | GBPm | | GBPm | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Revenue | | 2a | | 15,624 | | 11,423 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Other operating income | | | | 63 | | 75 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Operating costs | | | | (13,064) | | (8,534) | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Operating profit | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements and | | 2b | | 2,915 | | 2,595 | |
| stranded cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and stranded | | 3 | | (292) | | 369 | |
| cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Total operating profit | | 2c | | 2,623 | | 2,964 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Interest income and similar income | | 4 | | 1,315 | | 1,275 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Interest expense and other finance costs | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items and remeasurements | | | | (2,465) | | (2,045) | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items and remeasurements | | 3 | | (84) | | (16) | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | 4 | | (2,549) | | (2,061) | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Share of post-tax results of joint ventures and | | | | 5 | | 4 | |
| associates | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Profit before taxation | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements and | | | | 1,770 | | 1,829 | |
| stranded cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and stranded | | 3 | | (376) | | 353 | |
| cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Total profit before taxation | | | | 1,394 | | 2,182 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Taxation | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements and | | 5 | | (517) | | (579) | |
| stranded cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and stranded | | 3 | | 45 | | (28) | |
| cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Total taxation | | | | (472) | | (607) | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Profit from continuing operations after taxation | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items, remeasurements and | | | | 1,253 | | 1,250 | |
| stranded cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items, remeasurements and stranded | | 3 | | (331) | | 325 | |
| cost recoveries | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Profit for the year from continuing operations | | | | 922 | | 1,575 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Profit for the year from discontinued operations | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Before exceptional items and remeasurements | | 6 | | 9 | | 28 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Exceptional items and remeasurements | | 6 | | 16 | | 1,590 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | 25 | | 1,618 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Profit for the year | | | | 947 | | 3,193 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Attributable to: | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Equity shareholders of the parent | | | | 944 | | 3,190 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Minority interests | | | | 3 | | 3 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | 947 | | 3,193 | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Earnings per share from continuing operations | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Basic | | 7a | | 37.4p | | 60.3p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Diluted | | 7b | | 37.1p | | 59.9p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Earnings per share | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Basic | | 7a | | 38.5p | | 122.3p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| - Diluted | | 7b | | 38.2p | | 121.6p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Dividends per ordinary share: paid during the year | | 8 | | 33.94p | | 29.50p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| Dividends per ordinary share: for the year(i) | | | | 35.64p | | 33.00p | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+-------+--+----------+--+----------+--+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation (see note 9)
i) Approved or proposed to be paid.
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| CONSOLIDATED BALANCE SHEET | | | | 2009 | | 2008* | |
| at 31 March | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | |Note | | GBPm | | GBPm | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Non-current assets | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Goodwill | | | | 5,391 | | 3,904 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Other intangible assets | | | | 370 | | 271 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Property, plant and equipment | | | | 29,545 | | 24,331 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Deferred tax assets | | | | 137 | | - | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Pension asset | | | | 269 | | 846 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Other non-current assets | | | | 106 | | 164 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Financial and other investments | | | | 361 | | 251 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Derivative financial assets | | | | 1,533 | | 1,063 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total non-current assets | | | | 37,712 | | 30,830 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Current assets | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Inventories and current intangible assets | | | | 556 | | 438 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Trade and other receivables | | | | 2,672 | | 2,265 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Financial and other investments | | | | 2,197 | | 2,095 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Derivative financial assets | | | | 593 | | 463 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Cash and cash equivalents | | | | 737 | | 174 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total current assets | | | | 6,755 | | 5,435 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Assets of businesses held for sale | | | | - | | 1,506 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total assets | | | | 44,467 | | 37,771 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Current liabilities | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Borrowings | | | | (3,253) | | (3,882) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Derivative financial liabilities | | | | (307) | | (114) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Trade and other payables | | | | (2,835) | | (2,480) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Current tax liabilities | | | | (383) | | (295) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Provisions | | | | (248) | | (375) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total current liabilities | | | | (7,026) | | (7,146) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Non-current liabilities | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Borrowings | | | | (23,540) | | (17,121) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Derivative financial liabilities | | | | (633) | | (319) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Other non-current liabilities | | | | (2,092) | | (1,721) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Deferred tax liabilities | | | | (2,661) | | (3,259) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Pensions and other post-retirement benefit | | | | (3,080) | | (1,746) | |
| obligations | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Provisions | | | | (1,451) | | (1,022) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total non-current liabilities | | | | (33,457) | | (25,188) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Liabilities of businesses held for sale | | | | - | | (63) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total liabilities | | | | (40,483) | | (32,397) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Net assets | | | | 3,984 | | 5,374 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Equity | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Called up share capital | | | | 294 | | 294 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Share premium account | | | | 1,371 | | 1,371 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Retained earnings | | | | 7,135 | | 8,943 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Other equity reserves | | | | (4,830) | | (5,252) | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Shareholders' equity | | | | 3,970 | | 5,356 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Minority interests | | | | 14 | | 18 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| Total equity | | 10 | | 3,984 | | 5,374 | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
| | | | | | | | |
+----------------------------------------------------+--+------+--+----------+--+----------+--+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation (see note 9)
+------------------------------------------------------+------+--+----------+--+----------+--+
| CONSOLIDATED STATEMENT OF RECOGNISED | | | 2009 | | 2008* | |
| INCOME AND EXPENSE | | | | | | |
| for the years ended 31 March | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | GBPm | | GBPm | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Exchange adjustments | | | 464 | | (25) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Actuarial net (loss)/gain | | | (2,018) | | 432 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Deferred tax on actuarial net gains and losses | | | 678 | | (98) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net losses taken to equity in respect of cash flow | | | (1) | | (32) | |
| hedges | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Transferred to profit or loss on cash flow hedges | | | (53) | | (7) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Deferred tax on cash flow hedges | | | 19 | | 2 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net gains taken to equity on available-for-sale | | | 9 | | 6 | |
| investments | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Transferred to profit or loss on sale of | | | (18) | | - | |
| available-for-sale investments | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Deferred tax on available-for-sale investments | | | 7 | | 2 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net (expense)/income recognised directly in equity | | | (913) | | 280 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Profit for the year | | | 947 | | 3,193 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Total recognised income and expense for the year | | | 34 | | 3,473 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Attributable to: | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| - Equity shareholders of the parent | | | 26 | | 3,470 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| - Minority interests | | | 8 | | 3 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | 34 | | 3,473 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation (see note 9)
+------------------------------------------------------+------+--+----------+--+----------+--+
| CONSOLIDATED CASH FLOW STATEMENT | | | 2009 | | 2008 | |
| for the years ended 31 March | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | GBPm | | GBPm | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows from operating activities | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Total operating profit | | | 2,623 | | 2,964 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Adjustments for: | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Exceptional items, remeasurements and | | | 292 | | (369) | |
| stranded cost recoveries | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Depreciation and amortisation | | | 1,122 | | 994 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Share-based payment charge | | | 22 | | 18 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Changes in working capital | | | 54 | | (150) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Changes in provisions | | | (99) | | (5) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Changes in pensions and other post-retirement | | | (678) | | (333) | |
| benefit obligations | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows relating to exceptional items | | | (131) | | (132) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows relating to stranded cost recoveries | | | 359 | | 278 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows generated from continuing operations | | | 3,564 | | 3,265 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows relating to discontinued operations | | | (8) | | 10 | |
| (excluding tax) | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash generated from operations | | | 3,556 | | 3,275 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Tax paid | | | (143) | | (110) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net cash inflow from operating activities | | | 3,413 | | 3,165 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows from investing activities | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Acquisition of subsidiaries (net of cash acquired) | | | (73) | | (3,528) | |
| and other investments | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Sale of investments in subsidiaries and other | | | - | | 55 | |
| investments | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Purchases of intangible assets | | | (78) | | (45) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Purchases of property, plant and equipment | | | (3,107) | | (2,832) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Disposals of property, plant and equipment | | | 27 | | 26 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Interest received | | | 85 | | 206 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net movements in financial investments | | | 99 | | 45 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows used in continuing operations - investing | | | (3,047) | | (6,073) | |
| activities | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows relating to discontinued operations | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| - disposal proceeds (net of tax) (i) | | | 1,053 | | 3,064 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| - other investing activities | | | (4) | | (14) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net cash flow used in investing activities | | | (1,998) | | (3,023) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash flows from financing activities | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Proceeds from issue of share capital and sale of | | | 8 | | 23 | |
| treasury shares | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Increase in borrowings and related derivatives | | | 1,641 | | 1,563 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Interest paid | | | (1,061) | | (900) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Dividends paid to shareholders | | | (838) | | (780) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Repurchase of share capital and purchase of treasury | | | (627) | | (1,498) | |
| shares | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net cash flow used in financing activities | | | (877) | | (1,592) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net increase/(decrease) in cash and cash equivalents | | | 538 | | (1,450) | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Exchange movements | | | 18 | | 4 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Cash included within assets of businesses held for | | | - | | 23 | |
| sale | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net cash and cash equivalents at start of year | | | 164 | | 1,587 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| Net cash and cash equivalents at end of year (ii) | | | 720 | | 164 | |
+------------------------------------------------------+------+--+----------+--+----------+--+
| | | | | | | |
+------------------------------------------------------+------+--+----------+--+----------+--+
* 2009 includes payment of tax arising on disposal of the Ravenswood generation
station and other businesses of GBP564m.
* Net of bank overdrafts of GBP17m (2008: GBP10m).
NOTES TO THE PRELIMINARY ANNOUNCEMENT
1. Basis of preparation and new accounting standards, amendments and
interpretations
a) Basis of preparation
The financial information contained in this announcement, which does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985, has been derived from the statutory accounts for the year ended 31 March
2009, which will be filed with the Registrar of Companies in due course.
Statutory accounts for the year ended 31 March 2008 have been filed with the
Registrar of Companies. The auditors' reports on both these statutory accounts
were unqualified and did not contain a statement under Section 237(2) or (3) of
the Companies Act 1985.
The financial information included in this announcement has been prepared in
accordance with the accounting policies applicable for the year ended 31 March
2009 as set out in National Grid's Annual Report and Accounts for the year ended
31 March 2009. These accounting policies are consistent with those that applied
in the preparation of our accounts for the year ended 31 March 2008.
The following interpretations and amendments, issued by the International
Financial Reporting Interpretations Committee (IFRIC) and the International
Accounting Standards Board (IASB) respectively, have been adopted during the
year ended 31 March 2009, none of which had a material impact on consolidated
results or assets and liabilities.
* IFRIC 12 on service concession arrangements
* IFRIC 14 on defined benefit assets and minimum funding requirements
* Amendments to IAS 39 Financial Instruments: Recognition and measurement and IFRS
7 Financial Instruments: Disclosures: on reclassification of Financial Assets
In November 2008, a further amendment to IAS 39 was issued on the
reclassification of financial assets. This further amendment clarifies the
effective date and transition requirements of the amendments to IAS 39 and IFRS
7 adopted during the year. It is effective under IFRS 1 July 2008, but is still
subject to endorsement by the European Union. The amendment relating to the
reclassification of financial assets does not have an impact on the consolidated
results or assets and liabilities of the Company.
Following a review of the useful economic lives of property, plant and
equipment, the depreciation periods of certain assets within the category Gas
plant - mains, services and regulating equipment have been amended. This has
resulted in a decrease in the depreciation charge and a corresponding increase
in operating profit for the year ended 31 March 2009 of GBP43m.
As required under IFRS 3 'Business Combinations' the comparative amounts
presented within the full year results have been restated for the finalisation
of the fair values in respect of the acquisition of KeySpan Corporation (see
note 9).
Date of approval
This announcement was approved by the Board of Directors on 13 May 2009.
2. Segmental analysis
The following segmental analysis is presented in accordance with management
responsibilities and economic characteristics, including consideration of the
risks and returns, of our business activities. The Company assesses the
performance of its businesses principally on the basis of operating profit
before exceptional items, remeasurements and stranded cost recoveries. The
primary reporting format is by business and the secondary reporting format is by
geographical area. The following table describes the main activities for each
business segment:
+------------------------------+------------------------------------------------------+
| Transmission UK | High-voltage electricity transmission networks, the |
| | gas transmission network in the UK, UK liquefied |
| | natural gas (LNG) storage activities and the French |
| | electricity interconnector. |
+------------------------------+------------------------------------------------------+
| Transmission US | High-voltage electricity transmission networks in |
| | New York and New England. |
+------------------------------+------------------------------------------------------+
| Gas Distribution UK | Four of the eight regional networks of Great |
| | Britain's gas distribution system. |
+------------------------------+------------------------------------------------------+
| Gas Distribution US | Gas distribution in New York and New England. |
+------------------------------+------------------------------------------------------+
| Electricity Distribution and | Electricity distribution in New York and New England |
| Generation US | and electricity generation in New York. |
+------------------------------+------------------------------------------------------+
Other activities primarily relate to non-regulated businesses and other
commercial operations not included within the above segments, including UK-based
gas metering activities; UK property management; a UK LNG import terminal; other
LNG operations; US unregulated transmission pipelines; US home energy services;
US gas fields; together with corporate activities, including business
development.
Discontinued operations comprise the Ravenswood generation station in New York
City and the engineering and communications operations in the US acquired as
part of the KeySpan acquisition. The Ravenswood generation station was sold on
26 August 2008, KeySpan Communications was sold on 25 July 2008 and one of our
KeySpan engineering companies was sold on 11 July 2008. Subsequent to the year
end two further engineering companies were sold. For the year ended 31 March
2008, discontinued operations also include the wireless infrastructure and
communications operations in the UK and the US and an electricity interconnector
in Australia. The wireless infrastructure operations in the UK were sold on 3
April 2007; the US wireless operations were sold on the 15 August 2007; and the
Basslink electricity interconnector in Australia was sold on 31 August 2007. The
results for discontinued operations are disclosed in note 6.
Sales between businesses are priced having regard to the regulatory and legal
requirements to which the businesses are subject.
a. Revenue
+--------------------------------------------------------+----------+----------+----------+
| Year ended 31 March | | 2009 | 2008 |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Business segments - continuing operations | | | |
+--------------------------------------------------------+----------+----------+----------+
| Transmission UK | | 3,487 | 2,956 |
+--------------------------------------------------------+----------+----------+----------+
| Transmission US | | 420 | 299 |
+--------------------------------------------------------+----------+----------+----------+
| Gas Distribution UK | | 1,466 | 1,383 |
+--------------------------------------------------------+----------+----------+----------+
| Gas Distribution US | | 4,786 | 2,845 |
+--------------------------------------------------------+----------+----------+----------+
| Electricity Distribution and Generation US | | 4,972 | 3,508 |
+--------------------------------------------------------+----------+----------+----------+
| Other activities | | 719 | 642 |
+--------------------------------------------------------+----------+----------+----------+
| Sales between businesses | | (226) | (210) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | 15,624 | 11,423 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Total excluding stranded cost recoveries | | 15,189 | 11,041 |
+--------------------------------------------------------+----------+----------+----------+
| Stranded cost recoveries | | 435 | 382 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | 15,624 | 11,423 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Geographical segments | | | |
+--------------------------------------------------------+----------+----------+----------+
| UK | | 5,334 | 4,787 |
+--------------------------------------------------------+----------+----------+----------+
| US | | 10,290 | 6,636 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | 15,624 | 11,423 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
b. Operating profit - before exceptional items, remeasurements and stranded cost
recoveries
+------------------------------------------------------------+-----+----------+----------+
| Year ended 31 March | | 2009 | 2008 |
+------------------------------------------------------------+-----+----------+----------+
| | | GBPm | GBPm |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Business segments - continuing operations | | | |
+------------------------------------------------------------+-----+----------+----------+
| Transmission UK | | 1,126 | 1,021 |
+------------------------------------------------------------+-----+----------+----------+
| Transmission US | | 175 | 128 |
+------------------------------------------------------------+-----+----------+----------+
| Gas Distribution UK | | 672 | 595 |
+------------------------------------------------------------+-----+----------+----------+
| Gas Distribution US | | 612 | 392 |
+------------------------------------------------------------+-----+----------+----------+
| Electricity Distribution and Generation US | | 265 | 330 |
+------------------------------------------------------------+-----+----------+----------+
| Other activities | | 65 | 129 |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Operating profit before exceptional items, remeasurements | | 2,915 | 2,595 |
| and stranded cost recoveries | | | |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Geographical segments | | | |
+------------------------------------------------------------+-----+----------+----------+
| UK | | 1,875 | 1,752 |
+------------------------------------------------------------+-----+----------+----------+
| US | | 1,040 | 843 |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Operating profit before exceptional items, remeasurements | | 2,915 | 2,595 |
| and stranded cost recoveries | | | |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
c. Operating profit - after exceptional items, remeasurements and stranded cost
recoveries
+------------------------------------------------------------+-----+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008 |
+------------------------------------------------------------+-----+----------+----------+
| | | GBPm | GBPm |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Business segments - continuing operations | | | |
+------------------------------------------------------------+-----+----------+----------+
| Transmission UK | | 1,063 | 1,013 |
+------------------------------------------------------------+-----+----------+----------+
| Transmission US | | 173 | 122 |
+------------------------------------------------------------+-----+----------+----------+
| Gas Distribution UK | | 629 | 574 |
+------------------------------------------------------------+-----+----------+----------+
| Gas Distribution US | | 226 | 487 |
+------------------------------------------------------------+-----+----------+----------+
| Electricity Distribution and Generation US | | 531 | 696 |
+------------------------------------------------------------+-----+----------+----------+
| Other activities | | 1 | 72 |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Operating profit after exceptional items, remeasurements | | 2,623 | 2,964 |
| and stranded cost recoveries | | | |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Geographical segments | | | |
+------------------------------------------------------------+-----+----------+----------+
| UK | | 1,729 | 1,667 |
+------------------------------------------------------------+-----+----------+----------+
| US | | 894 | 1,297 |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
| Operating profit after exceptional items, remeasurements | | 2,623 | 2,964 |
| and stranded cost recoveries | | | |
+------------------------------------------------------------+-----+----------+----------+
| | | | |
+------------------------------------------------------------+-----+----------+----------+
3. Exceptional items, remeasurements and stranded cost recoveries
Exceptional items, remeasurements and stranded cost recoveries are items of
income and expenditure that, in the judgment of management, should be disclosed
separately on the basis that they are material, either by their nature or their
size, to an understanding of our financial performance and significantly distort
the comparability of financial performance between periods. Items of income or
expense that are considered by management for designation as exceptional items
include such items as significant restructurings, write-downs or impairments of
non-current assets, material changes in environmental or decommissioning
provisions, integration of acquired businesses and gains or losses on disposals
of businesses or investments.
Remeasurements comprise gains or losses recorded in the income statement arising
from changes in the fair value of commodity contracts and of derivative
financial instruments to the extent that hedge accounting is not achieved or is
not effective.
Stranded cost recoveries represent the recovery of historic generation related
costs in the US related to generation assets that are no longer owned. Such
costs can be recovered from customers as permitted by regulatory agreements.
+----------------------------------------------------------------+-+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008 |
+----------------------------------------------------------------+-+----------+----------+
| | | GBPm | GBPm |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional items - restructuring costs (i) | | (192) | (133) |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional items - environmental related provisions (ii) | | (78) | (92) |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional items - gain on disposal of subsidiary | | - | 6 |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional items - other (iii) | | (5) | (23) |
+----------------------------------------------------------------+-+----------+----------+
| Remeasurements - commodity contracts (iv) | | (443) | 232 |
+----------------------------------------------------------------+-+----------+----------+
| Stranded cost recoveries (v) | | 426 | 379 |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items, remeasurements and stranded cost | | (292) | 369 |
| recoveries included within operating profit | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Remeasurements - commodity contracts (iv) | | (2) | (9) |
+----------------------------------------------------------------+-+----------+----------+
| Remeasurements - net gains/(losses) on derivative financial | | (82) | (7) |
| instruments (vi) | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items and remeasurements included within | | (84) | (16) |
| finance costs | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items, remeasurements and stranded cost | | (376) | 353 |
| recoveries before taxation | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional tax item - deferred tax credit arising from | | - | 170 |
| reduction in UK tax rate (vii) | | | |
+----------------------------------------------------------------+-+----------+----------+
| Exceptional tax item - deferred tax charge arising from change | | (49) | - |
| in UK industrial building allowance regime (viii) | | | |
+----------------------------------------------------------------+-+----------+----------+
| Tax on exceptional items - restructuring costs (i) | | 59 | 49 |
+----------------------------------------------------------------+-+----------+----------+
| Tax on exceptional items - environmental related provisions | | 16 | 20 |
| (ii) | | | |
+----------------------------------------------------------------+-+----------+----------+
| Tax on exceptional items - gain on disposal of subsidiary | | - | (4) |
+----------------------------------------------------------------+-+----------+----------+
| Tax on exceptional items - other (iii) | | 2 | 5 |
+----------------------------------------------------------------+-+----------+----------+
| Tax on remeasurements - commodity contracts (iv) | | 179 | (90) |
+----------------------------------------------------------------+-+----------+----------+
| Tax on remeasurements - derivative financial instruments (vi) | | 8 | (28) |
+----------------------------------------------------------------+-+----------+----------+
| Tax on stranded cost recoveries (v) | | (170) | (150) |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Tax on exceptional items, remeasurements and stranded cost | | 45 | (28) |
| recoveries | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items, remeasurements and stranded cost | | (331) | 325 |
| recoveries | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items after taxation | | (247) | (2) |
+----------------------------------------------------------------+-+----------+----------+
| Total commodity contract remeasurements after taxation | | (266) | 133 |
+----------------------------------------------------------------+-+----------+----------+
| Total derivative financial instrument remeasurements after | | (74) | (35) |
| taxation | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total stranded cost recoveries after taxation | | 256 | 229 |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
| Total exceptional items, remeasurements and stranded cost | | (331) | 325 |
| recoveries after taxation | | | |
+----------------------------------------------------------------+-+----------+----------+
| | | | |
+----------------------------------------------------------------+-+----------+----------+
* Restructuring costs include costs related to the integration of KeySpan
(GBP53m), planned cost reduction programmes in our UK businesses (GBP21m), the
restructuring of our Liquefied Natural Gas (LNG) Storage facilities (GBP50m),
and transformation related initiatives (GBP68m). For the year ended 31 March
2008, restructuring costs included pension related costs of GBP83m arising as a
result of actual and planned redundancies.
* Environmental charges include GBP42m due to significant movements in discount
rates arising from reductions in market risk free rates due to the current
economic conditions together with GBP25m arising from changes in landfill tax
legislation in the UK. For the year ended 31 March 2009, the UK charge was
GBP37m and the US charge GBP41m. For 2008, the revision of cost estimates for
environmental provisions resulted in a charge in the UK of GBP44m and a charge
of GBP48m in the US. Costs incurred with respect to US environmental provisions
are substantially recoverable from customers.
* Other costs for the year ended 31 March 2009 include an amortisation charge on
acquisition-related intangibles of GBP5m (2008: GBP4m).
* Remeasurements - commodity contracts represent mark-to-market movements on
certain physical and financial commodity contract obligations in the US. These
contracts primarily relate to the forward purchase of energy for supply to
customers, or to the economic hedging thereof, that are required to be measured
at fair value and that do not qualify for hedge accounting. Under the existing
rate plans in the US, commodity costs are recoverable from customers although
the timing of recovery may differ from the pattern of costs incurred. These
movements are comprised of those impacting operating profit which are based on
the change in the commodity contract liability and those impacting finance costs
as a result of the time value of money.
* Stranded cost recoveries include the recovery of some of our historical
investments in generating plants that were divested as part of the restructuring
and wholesale power deregulation process in New England and New York during the
1990s. Stranded cost recoveries on a pre-tax basis consist of revenue of GBP435m
(2008: GBP382m) and operating costs of GBP9m (2008: GBP3m).
* Remeasurements - net gains/(losses) on derivative financial instruments comprise
gains/(losses) arising on derivative financial instruments reported in the
income statement. These exclude gains and losses for which hedge accounting has
been effective, which have been recognised directly in equity or which are
offset by adjustments to the carrying value of debt.
* The exceptional tax credit in the prior period of GBP170m arose from a reduction
in the UK corporation tax rate from 30% to 28% included in the 2007 Finance Act.
This resulted in a reduction in deferred tax liabilities.
* The exceptional tax charge of GBP49m in the period arose from a change in the UK
industrial building allowance regime arising in the 2008 Finance Act. This
resulted in an increase in deferred tax liabilities.
4. Finance income and costs
+--------------------------------------------------------+----------+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008* |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest income on financial instruments | | 79 | 211 |
+--------------------------------------------------------+----------+----------+----------+
| Expected return on pension and other post-retirement | | 1,236 | 1,064 |
| benefit plan assets (i) | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest income and similar income | | 1,315 | 1,275 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense on financial instruments | | (1,280) | (1,118) |
+--------------------------------------------------------+----------+----------+----------+
| Interest on pension and other post-retirement benefit | | (1,250) | (1,001) |
| plan liabilities (i) | | | |
+--------------------------------------------------------+----------+----------+----------+
| Unwinding of discounts on provisions | | (68) | (45) |
+--------------------------------------------------------+----------+----------+----------+
| Less: interest capitalised | | 133 | 119 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense | | (2,465) | (2,045) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net losses on derivative financial instruments and | | (84) | (16) |
| commodity contracts | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Interest expense and other finance costs | | (2,549) | (2,061) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net finance costs | | (1,234) | (786) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Comprising: | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net finance costs excluding exceptional finance costs | | (1,150) | (770) |
| and remeasurements | | | |
+--------------------------------------------------------+----------+----------+----------+
| Exceptional items and remeasurements (note 3) | | (84) | (16) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | (1,234) | (786) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation (see note 9)
i) The difference between actual and expected investment return on pension
assets is reported as an actuarial gain or loss within the statement of
recognised income and expense.
5. Taxation
+---------------------------------------------------------------+--+----------+----------+
| Year ended 31 March | | 2009 | 2008* |
+---------------------------------------------------------------+--+----------+----------+
| | | GBPm | GBPm |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Taxation before exceptional items, remeasurements and | | 517 | 579 |
| stranded cost recoveries | | | |
+---------------------------------------------------------------+--+----------+----------+
| Exceptional tax items | | 49 | (170) |
+---------------------------------------------------------------+--+----------+----------+
| Taxation on other exceptional items, remeasurements and | | (94) | 198 |
| stranded cost recoveries | | | |
+---------------------------------------------------------------+--+----------+----------+
| Taxation on total exceptional items, remeasurements and | | (45) | 28 |
| stranded cost recoveries (note 3) | | | |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Total taxation | | 472 | 607 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Taxation as a percentage of profit before taxation: | | % | % |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Before exceptional items, remeasurements and stranded cost | | 29.2 | 31.7 |
| recoveries | | | |
+---------------------------------------------------------------+--+----------+----------+
| After exceptional items, remeasurements and stranded cost | | 33.9 | 27.8 |
| recoveries | | | |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| The tax charge for the year can be analysed as follows: | | GBPm | GBPm |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| United Kingdom | | | |
+---------------------------------------------------------------+--+----------+----------+
| Corporation tax at 28% (2008: 30%) | | 37 | 214 |
+---------------------------------------------------------------+--+----------+----------+
| Corporation tax adjustment in respect of prior years (i) | | (54) | (156) |
+---------------------------------------------------------------+--+----------+----------+
| Deferred tax | | 339 | 42 |
+---------------------------------------------------------------+--+----------+----------+
| Deferred tax adjustment in respect of prior years (ii) | | - | 67 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| | | 322 | 167 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Overseas | | | |
+---------------------------------------------------------------+--+----------+----------+
| Corporate tax | | 105 | 209 |
+---------------------------------------------------------------+--+----------+----------+
| Corporate tax adjustment in respect of prior years | | 38 | 31 |
+---------------------------------------------------------------+--+----------+----------+
| Deferred tax | | 37 | 191 |
+---------------------------------------------------------------+--+----------+----------+
| Deferred tax adjustment in respect of prior years | | (30) | 9 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| | | 150 | 440 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
| Total tax charge | | 472 | 607 |
+---------------------------------------------------------------+--+----------+----------+
| | | | |
+---------------------------------------------------------------+--+----------+----------+
*Comparatives have been restated for the finalisation of the fair value exercise
on the acquisition of KeySpan Corporation (see note 9)
i) The UK corporation tax adjustment in respect of prior years includes a GBP2m
credit (2008: GBP9m charge) that relates to exceptional items, remeasurements
and stranded cost recoveries.
ii) The UK deferred tax adjustment in respect of prior years includes a GBP1m
charge (2008: GBP2m charge) that relates to exceptional items, remeasurements
and stranded cost recoveries.
6. Discontinued operations
Discontinued operations are businesses that have been sold, or which are held
for sale. Discontinued operations comprise the Ravenswood generation station in
New York City and the engineering and communications operations in the US
acquired as part of the KeySpan acquisition. The Ravenswood generation station
was sold on 26 August 2008, KeySpan Communications was sold on 25 July 2008 and
one of our KeySpan engineering companies was sold on 11 July 2008. Subsequent to
the year end two further engineering companies were sold.
For comparative periods, discontinued operations also include our former
wireless infrastructure operations in the UK and US, and the Basslink
electricity interconnector in Australia. The wireless infrastructure operations
in the UK and US were sold on 3 April 2007 and 15 August 2007 respectively,
while the Basslink electricity interconnector business was sold on 31 August
2007.
Results of discontinued operations
+--------------------------------------------------------+----------+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008 |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Revenue | | 97 | 201 |
+--------------------------------------------------------+----------+----------+----------+
| Operating costs | | (84) | (166) |
+--------------------------------------------------------+----------+----------+----------+
| Total operating profit from discontinued operations | | 13 | 35 |
+--------------------------------------------------------+----------+----------+----------+
| Remeasurement finance income | | - | 8 |
+--------------------------------------------------------+----------+----------+----------+
| Profit before tax from discontinued operations | | 13 | 43 |
+--------------------------------------------------------+----------+----------+----------+
| Taxation | | (4) | (7) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Profit after tax from discontinued operations | | 9 | 36 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Gain on disposal of Ravenswood | | 27 | - |
+--------------------------------------------------------+----------+----------+----------+
| Gains on disposals of UK and US wireless | | - | 1,506 |
| infrastructure operations | | | |
+--------------------------------------------------------+----------+----------+----------+
| Gain on disposal of Basslink | | - | 80 |
+--------------------------------------------------------+----------+----------+----------+
| Gain on disposal of discontinued operations before tax | | 27 | 1,586 |
+--------------------------------------------------------+----------+----------+----------+
| Taxation | | (11) | (4) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Gain on disposal after tax of discontinued operations | | 16 | 1,582 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Total profit for the year from discontinued operations | | | |
+--------------------------------------------------------+----------+----------+----------+
| - Before exceptional items, remeasurements and | | 9 | 28 |
| stranded cost recoveries | | | |
+--------------------------------------------------------+----------+----------+----------+
| - Exceptional items, remeasurements and stranded cost | | 16 | 1,590 |
| recoveries | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | 25 | 1,618 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
7. Earnings per share
a) Basic earnings per share
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Year ended 31 March | | | | Earnings | | Earnings |
| | | | Earnings | per | Earnings | per |
| | | | | share | | share |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | 2009 | 2009 | 2008* | 2008* |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | GBPm | pence | GBPm | pence |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Adjusted - continuing operations | | | 1,250 | 50.9 | 1,247 | 47.8 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Exceptional items after taxation | | | (247) | (10.1) | (2) | (0.1) |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Commodity contract | | | (266) | (10.8) | 133 | 5.1 |
| remeasurements after taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Derivative remeasurements after | | | (74) | (3.0) | (35) | (1.3) |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Stranded cost recoveries after | | | 256 | 10.4 | 229 | 8.8 |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Continuing operations | | | 919 | 37.4 | 1,572 | 60.3 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Adjusted - discontinued | | | 9 | 0.4 | 28 | 1.1 |
| operations | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Gains on disposal of operations | | | 16 | 0.7 | 1,582 | 60.6 |
| after taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Derivative remeasurements after | | | - | - | 8 | 0.3 |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Discontinued operations | | | 25 | 1.1 | 1,618 | 62.0 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Basic | | | 944 | 38.5 | 3,190 | 122.3 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | millions | | millions |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Weighted average number of | | | | 2,455 | | 2,609 |
| shares - basic | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
b) Diluted earnings per share
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Year ended 31 March | | | | Earnings | Earnings | Earnings |
| | | | Earnings | per | | per |
| | | | | share | | share |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | 2009 | 2009 | 2008* | 2008* |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | GBPm | pence | GBPm | pence |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Adjusted diluted - continuing | | | 1,250 | 50.6 | 1,247 | 47.5 |
| operations | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Exceptional items after taxation | | | (247) | (10.1) | (2) | (0.1) |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Commodity contract | | | (266) | (10.8) | 133 | 5.1 |
| remeasurements after taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Derivative remeasurements after | | | (74) | (3.0) | (35) | (1.3) |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Stranded cost recoveries after | | | 256 | 10.4 | 229 | 8.7 |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Diluted - continuing operations | | | 919 | 37.1 | 1,572 | 59.9 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Adjusted diluted - discontinued | | | 9 | 0.4 | 28 | 1.1 |
| operations | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Gains on disposal of operations | | | 16 | 0.7 | 1,582 | 60.3 |
| after taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Derivative remeasurements after | | | - | - | 8 | 0.3 |
| taxation | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Diluted - discontinued | | | 25 | 1.1 | 1,618 | 61.7 |
| operations | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Diluted | | | 944 | 38.2 | 3,190 | 121.6 |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | millions | | millions |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| Weighted average number of | | | | 2,472 | | 2,624 |
| shares - diluted | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
| | | | | | | |
+----------------------------------+--------+--------+----------+----------+----------+----------+
*Comparatives have been restated for the finalisation of the fair value exercise
on the acquisition of KeySpan Corporation (see note 9)
8. Dividends
The following table shows the dividends paid to equity shareholders:
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Year ended 31 March | | | 2009 | 2009 | | |
| | | | | | 2008 | 2008 |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| | | | pence | GBPm | pence | GBPm |
| | | | per | | per | |
| | | | ordinary | | ordinary | |
| | | | share | | share | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Ordinary dividends | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Interim dividend for the year ended 31 | | | 12.64 | 307 | - | - |
| March 2009 | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Final dividend for the year ended 31 | | | 21.30 | 531 | - | - |
| March 2008 | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Interim dividend for the year ended 31 | | | - | - | 11.70 | 300 |
| March 2008 | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| Final dividend for the year ended 31 | | | - | - | 17.80 | 480 |
| March 2007 | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| | | | 33.94 | 838 | 29.50 | 780 |
+----------------------------------------+----+-----+----------+---------+----------+---------+
| | | | | | | |
+----------------------------------------+----+-----+----------+---------+----------+---------+
In addition, the Directors are proposing a final dividend of 23.0p per share
that will absorb approximately GBP560m of shareholders' equity (assuming all
amounts are settled in cash) to be paid in respect of the year ended 31 March
2009. A scrip dividend alternative (i.e. shares in lieu of cash) will be offered
subject to shareholder approval at the Annual General Meeting.
9. Acquisitions
On 24 August 2007 the acquisition of KeySpan Corporation was completed with 100%
of the shares acquired for total cash consideration of GBP3.8bn including
acquisition costs of GBP25m. The provisional amount of goodwill recorded on the
acquisition was GBP2.3bn based on the provisional fair values that were
presented in our financial statements for the year ended 31 March 2008. The fair
value exercise has now been completed and the provisional fair values reported
in our financial statements for the year ended 31 March 2008 were updated and
were reported in our half-year announcement. As a result of the fair value
adjustments the final goodwill arising on the acquisition was GBP2.4bn. These
final fair values are presented in the table below.
The Ravenswood merchant electricity generation business in New York City was
sold on 26 August 2008 for consideration of $2.9bn, KeySpan Communications was
sold on 25 July 2008 for consideration of $35m, and one of our KeySpan
engineering companies was sold on 11 July 2008. The assets and liabilities
related to these businesses have been included in the 'Assets of businesses held
for sale' category in the table below and the results of these discontinued
operations are reported in note 6.
+--------------------------------------------------------+-------------+--------------+----------+
| | Provisional | Changes | Final |
| | | to | fair |
| | fair values | provisional | values |
| | as at | fair values | |
| | 31 March | | |
| | 2008 | | |
+--------------------------------------------------------+-------------+--------------+----------+
| | GBPm | GBPm | GBPm |
+--------------------------------------------------------+-------------+--------------+----------+
| | | | |
+--------------------------------------------------------+-------------+--------------+----------+
| Other intangible assets | 135 | (1) | 134 |
+--------------------------------------------------------+-------------+--------------+----------+
| Property, plant and equipment | 3,282 | (2) | 3,280 |
+--------------------------------------------------------+-------------+--------------+----------+
| Financial and other investments - non-current | 129 | - | 129 |
+--------------------------------------------------------+-------------+--------------+----------+
| Other non-current assets | 271 | (91) | 180 |
+--------------------------------------------------------+-------------+--------------+----------+
| Inventories and current intangibles | 505 | (17) | 488 |
+--------------------------------------------------------+-------------+--------------+----------+
| Trade and other receivables | 477 | (4) | 473 |
+--------------------------------------------------------+-------------+--------------+----------+
| Financial and other investments - current | 33 | - | 33 |
+--------------------------------------------------------+-------------+--------------+----------+
| Cash and cash equivalents | 260 | - | 260 |
+--------------------------------------------------------+-------------+--------------+----------+
| Assets of businesses held for sale | 1,487 | (2) | 1,485 |
+--------------------------------------------------------+-------------+--------------+----------+
| Borrowings - current | (545) | - | (545) |
+--------------------------------------------------------+-------------+--------------+----------+
| Trade and other payables | (654) | (35) | (689) |
+--------------------------------------------------------+-------------+--------------+----------+
| Current tax liabilities | (95) | (1) | (96) |
+--------------------------------------------------------+-------------+--------------+----------+
| Borrowings - non-current | (1,934) | - | (1,934) |
+--------------------------------------------------------+-------------+--------------+----------+
| Other non-current liabilities | (169) | - | (169) |
+--------------------------------------------------------+-------------+--------------+----------+
| Deferred tax liabilities | (591) | 148 | (443) |
+--------------------------------------------------------+-------------+--------------+----------+
| Pensions and other post-retirement benefit obligations | (440) | - | (440) |
+--------------------------------------------------------+-------------+--------------+----------+
| Provisions | (643) | (61) | (704) |
+--------------------------------------------------------+-------------+--------------+----------+
| Liabilities of businesses held for sale | (73) | - | (73) |
+--------------------------------------------------------+-------------+--------------+----------+
| Minority interest | (8) | - | (8) |
+--------------------------------------------------------+-------------+--------------+----------+
| | | | |
+--------------------------------------------------------+-------------+--------------+----------+
| Net assets acquired | 1,427 | (66) | 1,361 |
+--------------------------------------------------------+-------------+--------------+----------+
| | | | |
+--------------------------------------------------------+-------------+--------------+----------+
| Goodwill arising on acquisition | 2,335 | 66 | 2,401 |
+--------------------------------------------------------+-------------+--------------+----------+
| | | | |
+--------------------------------------------------------+-------------+--------------+----------+
| Total consideration | 3,762 | - | 3,762 |
+--------------------------------------------------------+-------------+--------------+----------+
| | | | |
+--------------------------------------------------------+-------------+--------------+----------+
The acquisition exchange rate which was used to translate the US dollar fair
values into sterling was $2.01:GBP1.00.
As required under IFRS 3 'Business Combinations' the comparative amounts
presented within the full year results have been restated for the finalisation
of the fair values. The significant changes made to the comparative balance
sheet represent the movements between the provisional fair values in the
consolidated balance sheets at 31 March 2008 and final fair values, together
with any associated reclassification adjustments. In addition the consolidated
income statement for the year ended 31 March 2008 has been adjusted to reflect
an increase in interest expense of GBP10m and a decrease in taxation of GBP4m
resulting from the finalisation of the fair values.
Pro forma information for the year ended 31 March 2008
The following summary presents the consolidated results as if KeySpan had been
acquired on 1 April 2007. The pro forma information includes the results of
KeySpan for the year 1 April 2007 to 31 March 2008 as adjusted for the estimated
effect of accounting policies adopted by National Grid and the impact of fair
value accounting adjustments (e.g. amortisation of intangible assets) together
with the recognition of the impact on pro forma net interest expense as a result
of the acquisition. All of the pre-tax pro forma adjustments have been taxed
(where appropriate) at the rate of tax pertaining to the jurisdiction in which
the pro forma adjustment arose. The pro forma information is provided for
comparative purposes only and does not necessarily reflect the actual results
that would have occurred, nor is it necessarily indicative of future results of
operations of the enlarged National Grid.
+--------------------------------------------------------+----------+----------+----------+
| | 2008* | |
| | | 2008* |
+-------------------------------------------------------------------+----------+----------+
| | Actual | Pro |
| | | forma |
+-------------------------------------------------------------------+----------+----------+
| | GBPm | GBPm |
+-------------------------------------------------------------------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Continuing operations | | |
+-------------------------------------------------------------------+----------+----------+
| Revenue | 11,423 | 12,345 |
+-------------------------------------------------------------------+----------+----------+
| Operating profit before exceptional items, remeasurements and | 2,595 | 2,625 |
| stranded cost recoveries | | |
+-------------------------------------------------------------------+----------+----------+
| Total operating profit | 2,964 | 2,901 |
+-------------------------------------------------------------------+----------+----------+
| Profit after taxation | | |
+-------------------------------------------------------------------+----------+----------+
| Before exceptional items, remeasurements and stranded cost | 1,250 | 1,165 |
| recoveries | | |
+-------------------------------------------------------------------+----------+----------+
| Exceptional items, remeasurements and stranded cost recoveries | 325 | 268 |
+-------------------------------------------------------------------+----------+----------+
| Profit for the year - continuing operations | 1,575 | 1,433 |
+-------------------------------------------------------------------+----------+----------+
| | | |
+-------------------------------------------------------------------+----------+----------+
| Attributable to: | | |
+-------------------------------------------------------------------+----------+----------+
| Equity shareholders of the parent | 1,572 | 1,430 |
+-------------------------------------------------------------------+----------+----------+
| Minority interests | 3 | 3 |
+-------------------------------------------------------------------+----------+----------+
| | | |
+-------------------------------------------------------------------+----------+----------+
| Profit for the year - continuing operations | 1,575 | 1,433 |
+-------------------------------------------------------------------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | Earnings | Earnings |
| | | per | per |
| | | share | share |
| | | pence | pence |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Adjusted earnings - continuing operations | | 47.8p | 44.5p |
+--------------------------------------------------------+----------+----------+----------+
| Earnings - continuing operations | | 60.3p | 54.8p |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
* Restated for the finalisation of the fair value exercise on the acquisition of
KeySpan Corporation as noted above.
10. Reconciliation of movements in total equity
+--------------------------------------------------------+----------+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008* |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Opening total equity | | 5,374 | 4,136 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Changes in total equity for the period | | | |
+--------------------------------------------------------+----------+----------+----------+
| Total recognised income and expense | | 34 | 3,473 |
+--------------------------------------------------------+----------+----------+----------+
| Equity dividends | | (838) | (780) |
+--------------------------------------------------------+----------+----------+----------+
| Issue of ordinary share capital | | - | 13 |
+--------------------------------------------------------+----------+----------+----------+
| B shares converted to ordinary shares | | - | 27 |
+--------------------------------------------------------+----------+----------+----------+
| Repurchase of share capital and purchase of treasury | | (603) | (1,522) |
| shares (i) | | | |
+--------------------------------------------------------+----------+----------+----------+
| Other movements in minority interests | | (12) | 4 |
+--------------------------------------------------------+----------+----------+----------+
| Share-based payment | | 22 | 18 |
+--------------------------------------------------------+----------+----------+----------+
| Tax charge on share-based payment | | (1) | (5) |
+--------------------------------------------------------+----------+----------+----------+
| Issue of treasury shares | | 8 | 10 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Closing total equity | | 3,984 | 5,374 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
* Comparatives have been restated for the finalisation of the fair value
exercise on the acquisition of KeySpan Corporation (see note 9)
(i) From 1 April 2008 to 24 September 2008, the Company repurchased 85 million
ordinary shares for an aggregate consideration of GBP597m (2008: GBP1,516m)
including transaction costs. The shares repurchased have a nominal value of 11
17/43 pence each and represented 3% of the ordinary shares in issue as at
31 March 2009. Further purchases of shares relating to employee share schemes
were made for aggregate consideration of GBP6m (2008: GBP6m).
Included within total equity is a deduction of GBP1,173m for treasury shares
(2008: GBP570m).
11. Reconciliation of net cash flow to movement in net debt
+--------------------------------------------------------+----------+----------+----------+
| Year ended 31 March | | 2009 | |
| | | | 2008 |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Increase/(decrease) in cash and cash equivalents | | 538 | (1,450) |
+--------------------------------------------------------+----------+----------+----------+
| Decrease in financial investments | | (99) | (45) |
+--------------------------------------------------------+----------+----------+----------+
| Increase in borrowings and related derivatives (i) | | (1,641) | (1,563) |
+--------------------------------------------------------+----------+----------+----------+
| Net interest paid | | 956 | 694 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Increase in net debt resulting from cash flows | | (246) | (2,364) |
+--------------------------------------------------------+----------+----------+----------+
| Changes in fair value of financial assets and | | (3,625) | (133) |
| liabilities and exchange movements | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net interest charge | | (1,161) | (901) |
+--------------------------------------------------------+----------+----------+----------+
| Borrowings of subsidiary undertakings acquired | | - | (2,446) |
+--------------------------------------------------------+----------+----------+----------+
| Amounts reclassified to businesses held for sale | | - | 17 |
+--------------------------------------------------------+----------+----------+----------+
| Other non-cash movements | | - | (26) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Movement in net debt (net of related derivative | | (5,032) | (5,853) |
| financial instruments) in the year | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt at start of year | | (17,641) | (11,788) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt (net of related derivative financial | | (22,673) | (17,641) |
| instruments) at end of year | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
i) The increase in borrowings and related derivatives for the year ended 31
March 2009 comprises proceeds from loans received of GBP4.9bn less payments to
repay loans of GBP2.6bn and movement in short-term borrowings and derivative
settlements of GBP0.7bn.
12. Net debt
+--------------------------------------------------------+----------+----------+----------+
| At 31 March | | 2009 | 2008 |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Cash and cash equivalents | | 737 | 174 |
+--------------------------------------------------------+----------+----------+----------+
| Bank overdrafts | | (17) | (10) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net cash and cash equivalents | | 720 | 164 |
+--------------------------------------------------------+----------+----------+----------+
| Financial investments | | 2,197 | 2,095 |
+--------------------------------------------------------+----------+----------+----------+
| Borrowings (excluding bank overdrafts) | | (26,776) | (20,993) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | (23,859) | (18,734) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt related derivative financial assets | | 2,126 | 1,526 |
+--------------------------------------------------------+----------+----------+----------+
| Net debt related derivative financial liabilities | | (940) | (433) |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Net debt (net of related derivative financial | | (22,673) | (17,641) |
| instruments) | | | |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
13. Commitments and contingencies
+--------------------------------------------------------+----------+----------+----------+
| At 31 March | | 2009 | |
| | | | 2008 * |
+--------------------------------------------------------+----------+----------+----------+
| | | GBPm | GBPm |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
| Future capital expenditure contracted for but not | | 1,493 | 1,097 |
| provided | | | |
+--------------------------------------------------------+----------+----------+----------+
| Commitments under non-cancellable operating leases | | 946 | 737 |
+--------------------------------------------------------+----------+----------+----------+
| Energy purchase commitments (i) | | 3,645 | 2,061 |
+--------------------------------------------------------+----------+----------+----------+
| Guarantees (ii) | | 1,022 | 925 |
+--------------------------------------------------------+----------+----------+----------+
| Other commitments and contingencies (iii) | | 644 | 462 |
+--------------------------------------------------------+----------+----------+----------+
| | | | |
+--------------------------------------------------------+----------+----------+----------+
* Comparatives have been restated to present items on a basis consistent with
the current year classification.
(i) Commodity contracts that do not meet the normal purchase, sale or usage
criteria and hence are accounted for as derivative contracts are recorded at
fair value and incorporated in other non-current assets, trade and other
receivables, trade and other payables and other non-current liabilities. At
31 March 2009 these amounted to a net liability of GBP310m (2008: GBP12m net
asset).
(ii) Details of the guarantees entered into by the Company or its
subsidiary undertakings at 31 March 2009 are shown below:
* a guarantee in respect of Ravenswood Unit 40 financing amounting to
approximately GBP268m. This expires in 2040;
* a letter of support of obligations under a shareholders' agreement relating to
the interconnector project between Britain and the Netherlands amounting to
approximately GBP264m. This expires in 2010;
* guarantees of certain obligations in respect of the UK Grain LNG Import Terminal
amounting to approximately GBP188m. These run for varying lengths of time,
expiring between now and 2028;
* a guarantee amounting to approximately GBP122m of half of the obligations of the
interconnector project between Britain and the Netherlands. This expires in
2010;
* guarantees of the liabilities of a metering subsidiary under meter operating
contracts amounting to GBP53m. These are ongoing;
* an uncapped guarantee, for which the maximum liability is estimated at GBP40m,
to The Crown Estates in support of the transfer of the interconnector between
France and England to National Grid Interconnectors Limited as part of the
Licence to Assign Lease. This is ongoing;
* letters of credit in support of gas balancing obligations amounting to GBP21m,
lasting for less than one year;
* guarantees of GBP15m relating to certain property obligations. The bulk of these
expire by December 2025;
* collateral of GBP15m to secure syndicate insurance obligations which are
evergreen;
* guarantees in respect of a former associate amounting to GBP14m, the bulk of
which relates to its obligations to supply telecommunications services. These
are open-ended; and
* other guarantees amounting to GBP22m arising in the normal course of business
and entered into on normal commercial terms. These guarantees run for varying
lengths of time.
(iii) Includes commitments largely relating to gas purchasing and property
remediation of GBP615m (2008: GBP432m).
For a portion of our customers in New England the Company has entered into fixed
price electricity requirement contracts with various counterparties. The
contracts do not contain a determinable notional value as they are dependent on
future customer demand. The contracts range in term from 3 to 6 months with
monthly prices per megawatt-hour ranging from $58 to $123. These do not
represent onerous contracts as actual prices incurred are recovered from our
customers.
In February 2008, the Gas and Electricity Markets Authority (GEMA) issued a
decision to fine us GBP41.6 million for a breach of the UK Competition Act 1998
in respect of term contracts with gas suppliers entered into by our UK metering
services business in 2004. We subsequently appealed this decision to the
Competition Appeal Tribunal (the Tribunal). On 29 April 2009 the Tribunal
overturned the decision in part and reduced the fine to GBP30 million but also
upheld the original decision in part. We continue to review the Tribunal's
ruling and are considering our legal position including potential grounds for
appeal.
In October 2008, we informed Ofgem that our mains replacement activity carried
out within the UK's West Midlands Alliance partnership may have been
misreported. National Grid and Ofgem have jointly appointed Ernst & Young to
carry out a full investigation to determine the extent of the issue. At present
it is too early to determine the likely outcome of the investigation and any
potential consequences.
As previously reported, in May 2007 KeySpan received a civil investigative
demand from the Antitrust Division of the United States Department of Justice,
requesting the production of documents and information relating to its
investigation of competitive issues in the New York City electricity capacity
market prior to our acquisition of KeySpan. The civil investigative demand is a
request for information in the course of an investigation and does not
constitute the commencement of legal proceedings, and no specific allegations
have been made against KeySpan. In April 2008, we received a second civil
investigation demand in connection with this matter. We believe that KeySpan's
activity in the capacity market has been consistent with all applicable laws and
regulations. The investigation is ongoing and we continue to cooperate fully.
14. Exchange rates
The consolidated results are affected by the exchange rates used to translate
the results of its US operations and US dollar transactions. The US dollar to
pound sterling exchange rates used were:
+----------------------------------------------------------+---------+---------+---------+
| As at 31 March | | 2009 | |
| | | | 2008 |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
| Closing rate applied at period end | | 1.44 | 1.98 |
+----------------------------------------------------------+---------+---------+---------+
| Average rate applied for the period | | 1.54 | 2.01 |
+----------------------------------------------------------+---------+---------+---------+
| | | | |
+----------------------------------------------------------+---------+---------+---------+
15. Related party transactions
There were no significant changes in the nature and size of related party
transactions for the period from those disclosed in the financial statements for
the year ended 31 March 2008.
1 A reconciliation of Business performance2 to pro forma is provided.
2Business performance results are the primary financial performance measure used
by National Grid, being the results for continuing operations before exceptional
items, remeasurements and stranded cost recoveries. Remeasurements comprise
gains or losses recorded in the income statement arising from changes in the
fair value of commodity contracts and of derivative financial instruments to the
extent that hedge accounting is not achieved or is not fully effective.
Stranded cost recoveries are costs associated with historic generation
investment and related contractual commitments that were not recovered through
the sale of those investments - these recoveries end in 2011. Further details
are provided in Note 3. A reconciliation of Business performance to Statutory
results is provided in the consolidated income statement.
3 A description of this metric is provided.
4Weighted average RPI + X revenue increase for UK Gas Distribution, Gas
Transmission and Electricity Transmission based on their regulatory asset value
at 31 March 2008.
5 Based on a exchange rates of $1.5:GBP1.
6 'Constant currency basis' refers to the reporting of the actual results
against the prior period results which, in respect of any US$ currency
denominated activity, have been translated using the average US$ exchange rate
for the year ended 31 March 2009, which was $1.54 to GBP1.00. The average rate
for the year ended 31 March 2008 was $2.01 to GBP1.00.
7 A description of these metrics is provided.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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